Key terms in auto insurance

1. Premium

Your auto insurance premium is the amount you pay your insurer to keep your vehicle protected. Depending on the terms set by your insurer or distributor, it can be paid monthly, in a few instalments, or once a year.

The cost of insurance varies based on several factors, such as your driving history, adding a driver, or the number of past insurance claims. Also consider the coverage offered and the quality of service from your agent or broker. This can make all the difference when it’s time to file a claim.

2. Risk

In auto insurance, the word risk refers to anything that could cause a loss. It’s central to how insurance coverage is defined. Two important concepts to know:

• All perils coverage includes several situations such as fire, theft, vandalism, and windshield damage. However, it doesn’t cover normal wear and tear, such as replacing brake pads. That’s why this coverage is often referred to as “all perils except.”
• Specified perils coverage (or named perils coverage) only covers events clearly listed in your policy, such as theft or fire. It’s generally a less expensive option.

3. Liability coverage

In auto insurance, liability coverage applies if you damage property with your vehicle, such as a lamppost.

Good to know: Liability coverage under your auto insurance is different from the liability coverage under your home insurance. The latter covers you for damage caused to others in your personal life, anywhere in the world.

4. Exclusions

All automobile insurance policies contain exclusions—situations where the insurer won’t pay out. The most common include:

• Damage caused intentionally by the insured
• Losses that occur while the vehicle is being used for an activity not covered under the policy (e.g., paid transportation without the right coverage), or if you haven’t purchased insurance suited to its actual use
• Damage caused by war

5. Deductible

Your auto insurance deductible is the amount you’ll need to pay in the event of a car accident or loss you’re responsible for. The higher your deductible, the lower your insurance premium. But if you’re in a road accident, you’ll pay more out of pocket. Are you willing to take that risk?

6. Occasional or secondary driver

Do you share a car with your spouse or have a child who’s old enough to drive? Add them to your policy as a secondary driver so they benefit from the same insurance coverage as you. It will be much cheaper than insuring them as a principal driver, and it will help them build their driving record.

Good to know: You aren’t required to list your spouse or child as a secondary driver if they have their own vehicle and insurance. However, in the event of an accident, the insurer will ask questions about how the vehicle was being used by the driver involved. If an undeclared driver turns out to be the vehicle’s primary user, your claim could be denied. In other words, it’s better to declare secondary drivers upfront than to have to justify things after a loss.

7. No-fault insurance

Contrary to what many people think, no-fault doesn’t refer to who’s responsible for an accident. In Quebec, no-fault means that the public auto insurance plan covers everyone involved in an accident, regardless of who’s at fault. In practice, you’ll be compensated by the SAAQ even if you:

• made a driving error;
• have little driving experience; or
• were driving on summer tires after December 1, and so on.

As for property damage, it’s each driver’s private insurance company that determines whether or not to compensate them, based on the terms of their policy.

8. Q.E.F. (Quebec Endorsement Form)

A Q.E.F. is a document that modifies the terms of your auto insurance policy. It can enhance one type of coverage, limit another, or remove an exclusion altogether. Each insurer can decide whether or not to offer the endorsements currently available in Quebec and approved by the Autorité des marchés financiers.

Some of the most common endorsements include:

• Q.E.F. 43 (replacement cost)
• Q.E.F. 20 (transportation expenses)
• Q.E.F. 27 (damage to a vehicle you don’t own, such as a rented or borrowed vehicle)
• Q.E.F. 34 (death or dismemberment indemnity)

These endorsements let you add extra optional coverage to your policy, based on your specific needs.

Tip: Always read your insurance policy, even if it’s long and written in fine print. If a term is unclear, ask your agent.

Finally, shop around for your insurance. Compare quotes from at least three insurers, whether in person, over the phone with an agent or broker, or by getting an auto insurance quote online. A good understanding helps you protect yourself better, no matter your driving experience or the type of vehicle you insure.

Every company has its strengths. For example, the insurer that offered the best rate for your SUV may not be as competitive if you switch to a sedan or an electric vehicle. Check out our other tips for better understanding and saving on your auto insurance.